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Order No. 2005-R-277

May 19, 2005

May 19, 2005

IN THE MATTER OF Certificate of fitness No. 99001 held by Ferroequus Railway Company Limited.

File No. R 8005/F1

Under Certificate of fitness No. 99001 dated July 5, 1999, Ferroequus Railway Company Limited (hereinafter FE) is authorized pursuant to section 92 of the Canada Transportation Act, S.C., 1996, c. 10 (hereinafter the CTA) to operate non-revenue moves related to the testing of a proposed federal railway operation on the Caso Subdivision of the Canada Southern Railway Company, from mileage 112.0 to mileage 112.5 in St. Thomas, Ontario and, through a commercial agreement, on the lines of the Canadian National Railway Company between St. Thomas and Québec, Quebec.

Subsection 92(1) of the CTA provides that the Canadian Transportation Agency (hereinafter the Agency) shall issue a certificate of fitness for the proposed construction or operation of a railway if the Agency is satisfied that there will be adequate liability insurance coverage for the proposed construction or operation.

Pursuant to Decision No. 388-R-1999 dated July 5, 1999, the Agency issued Certificate of fitness No. 99001 as it found, at that time, that FE had a bona fide railway proposal, that FE's railway proposal fell within the jurisdiction of the Parliament of Canada as it crossed a provincial boundary, and that FE had adequate third party liability insurance coverage, including self-insurance, to operate non-revenue moves related to the testing of a proposed federal railway operation.

By Order No. 2005-R-49 dated February 3, 2005, Certificate of fitness No. 99001 was suspended pursuant to subsection 94(2) of the CTA for failure by FE to maintain adequate third party liability insurance coverage. FE was provided with a period of thirty (30) days from the date of the Order to show cause why Certificate of fitness No. 99001 should not be cancelled pursuant to subsection 94(2) of the CTA.

In response to Order No. 2005-R-49, FE requested that the Agency rescind LET-R-313-2004 and Order No. 2005-R-49.

FE states that the insurance coverage maintained by FE has been and continues to be adequate. FE argues that its railway equipment is in storage and its railway operations are dormant. FE submits that, as there are no operations and, therefore, no operating risk, there is no need to secure liability insurance for operating railway conditions. Notwithstanding the above, FE submits that it is able to secure adequate third party liability insurance to cover any prospective rail operations and adds that it will place that cover at the time it commences operations.

FE submits that it proposes to construct or operate a railway within the jurisdiction of Parliament. FE states that it has identified certain rail opportunities in the federal jurisdiction and is currently in discussions to carry out these opportunities. FE adds that at the conclusion of these discussions, an application will be filed with the Agency requesting a variance to its certificate of fitness.

FE maintains that it only received copies of LET-R-313-2004 and Order No. 2005-R-49, which, in its opinion, was issued as the consequence of an unintentional communication failure as well as incomplete information, on February 4, 2005, i.e. the day following the issuance of the Order.

Pursuant to section 32 of the CTA, the Agency may review, rescind or vary any decision or order made by it if there has been a change in facts or circumstances since the issuance of the decision or order.

With respect to FE's claim that it only received copies of Decision No. LET-R-313-2004 and Order No. 2005-R-49 on February 4, 2005, the Agency notes that the above Decision and Order were sent to FE's recipient of record for certificate of fitness purposes on file with the Agency. While it may be possible that FE, because of its failure to update its contact record with the Agency, did not receive a copy of the above documents, there is, at this time, no need to make a determination on this point as this issue is moot. That is, any impossibility by FE to address the issues raised in LET-R-313-2004 and in Order No. 2005-R-49 was remedied by FE being allowed to provide the Agency with its comments prior to the cancellation of its certificate of fitness.

The Agency has considered FE's request that the Agency rescind Decision No. LET-R-313-2004 and Order No. 2005-R-49 and finds that there has not been a substantive change in the facts or circumstances since the issuance of LET-R-313-2004 and Order No. 2005-R-49. However, the Agency has determined, pursuant to subsection 27(1) of the CTA, that FE's request should be dealt with in the context of subsection 94(2) of the CTA.

Pursuant to subsection 94(2) of the CTA, the Agency may suspend or cancel a certificate of fitness if it determines that the liability insurance coverage is no longer adequate.

With respect to FE's insurance coverage, the Agency notes that while FE's operations may be dormant and the operating risk may be minimal, FE maintained a valid certificate of fitness prior to the suspension of this certificate by the Agency. This certificate could have allowed FE to resume and/or commence railway operations without any further regulatory oversight by the Agency and without adequate insurance coverage in place.

In order to ensure that every railway operation is adequately insured, railway companies holding certificates of fitness issued by the Agency should, subject to such certificate being suspended and/or cancelled, always maintain the necessary liability insurance coverage to cover the risk associated with the operation described in the certificates.

As FE, on October 10, 2002, ceased to maintain adequate liability insurance coverage for the operation described in its certificate of fitness, the Agency finds that FE still does not meet the insurance coverage requirement imposed by subsection 92(1) of the CTA.

With respect to FE's proposal to operate a railway within the meaning of subsection 92(1) of the CTA, the Agency has examined the evidence on file and finds that FE is currently in discussions for a bona fide proposal to operate a railway within the jurisdiction of the Parliament of Canada.

In this respect, the Agency has determined that in respect of proposed railway operation for which the certificate of fitness was issued, FE does not meet the requirement of subsection 92(1) of the CTA as it no longer has adequate liability insurance coverage for the proposed construction or operation. However, given that FE still has a bona fide proposal to operate a railway within the legislative authority of Parliament, the Agency, at this time, will not cancel FE's certificate of fitness.

The Agency has considered the matter and, pursuant to subsection 94(2) of the CTA, hereby suspends Certificate of fitness No. 99001.

This Order shall form part of Certificate of fitness No. 99001 and shall remain affixed thereto until further order of the Agency.